Future.

Chapter 13 does not freeze a homeowner’s life for three to five years. Selling, refinancing, or otherwise dealing with the house is often possible mid-plan, but it usually cannot happen the way an ordinary transaction would. 

This article looks at why bankruptcy-court approval typically comes before closing, what the court and trustee tend to review, and what a Mississippi homeowner should line up before signing anything.

Court Approval Comes Before the Closing Table

Under Chapter 13, a debtor keeps possession of estate property, but the authority to sell or encumber it is a trustee’s power the debtor exercises under 11 U.S.C. § 1303. Mississippi’s standard Chapter 13 plan and confirmation order keep property in the bankruptcy estate until discharge, rather than returning it to the debtor earlier as 11 U.S.C. § 1327otherwise permits. 

In Meza v. Truman, the Fifth Circuit found that debtors who refinanced an exempt home to pay off their plan should have sought court permission first.

What the Court and Trustee Will Want to See

A motion to sell under 11 U.S.C. § 363(b) generally requires notice and a hearing opportunity. It should lay out the buyer, price, existing liens, estimated net proceeds, and whether a plan modification is needed. 

Federal Rule of Bankruptcy Procedure 2002 typically calls for at least 21 days’ notice to creditors, and a sale order is ordinarily stayed 14 days under Rule 6004. A refinance creates new debt and a new lien, so Mississippi’s Local Rule 4002-1(d)(6) requires a motion and proposed order for a consumer debtor. 

Mississippi Code § 85-3-21 protects up to $75,000 in qualifying homestead equity, and § 85-3-1(b)(i) can extend that protection to sale proceeds, though the transaction still must be disclosed.

Talk to Counsel Before You List or Refinance

At O’Brien Law Firm, LLC, we help Mississippi Chapter 13 debtors prepare the motion and proposed order the trustee and court will expect, and we work out the timing so a sale or refinance does not put your existing plan at risk. Call us at 662-672-7619 or reach out through our contact form so we can look at your sale or refinance plans before you sign anything.